Bitcoin crash – just watch and learn

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Who cares? I am not concerned at all that Bitcoin is crashing as it is a volatile beast. It is not for the feint of heart that is for sure. If you are not sure about what I am talking about, Bitcoin, the flagship cryptocurrency, has seen its price slashed by some 50% over the last couple of weeks. For those who have been trying to ride the wave and make a fortune to impress their spouses, it probably was not all that pleasant. Wow, Bitcoin is still up by almost 1,000% over the last year, after the latest drop.


Mainstream financial products now exist that allow investors to speculate on Bitcoin. Specifically, on November 25, the Chicago Board Option Exchange (CBOE) started trading Bitcoin futures. Then on December 17, the Chicago Mercantile Exchange (CME) starting trading Bitcoin futures as well.

Collusion and manipulation are possible but who cares again? We have had plenty of negative coverage and numerous stories about consumers taking out cheap credit to buy expensive Bitcoins. We have also seen numerous reports about how governments have been cracking down on Bitcoin exchanges and miners. Then there are the hacks, the internet heists, and blah, blah, and blah.

Everyone has an opinion on cryptocurrencies all the time. My advice is the same as it would have been a few months or one or two years ago that is stay away from Bitcoin and any other cryptocurrencies. I am trying to be nice here. Blockchain may be what the internet was in the dotcom bubble - the underlying technological revolution that will survive and alter our lives and maybe some of the cryptocurrencies may survive as well.

The reality is that currently most cryptocurrencies have “nothing (offering little or no value)” and people only buy them with the hopes of price appreciation. Most coins will be wiped out sooner or later. Bolder investors are wondering which coins will emerge stronger than ever from that eventual collapse.

Will there be a “Happy Ending?” Not according to Warren Buffett. The Oracle of Omaha says, “I can say almost with certainty that they will come to a bad ending.” It would be easy to dismiss Mr. Buffett as an old curmudgeon whose time has passed and “just does not get it.” He said the same thing about most of the high-flying internet companies of the Dot-com boom – most of whom no longer exist.

Will a further collapse in Bitcoin affect stock market prices? Maybe since markets tend to be irrational driven by sentiments. Indeed, I am now looking at a chart which shows that Bitcoin appears to have a reasonable correlation to stocks.

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